EV Salary Sacrifice & Personal Allowance

rajanm

Hi everyone,

I am thinking of switching to a fully electric Renault Scenic E-Tech Estate. I can get the Techno version in black with 5000 miles for £553 gross a month through my employers salary sacrifice scheme. This works out at £381 net (factoring in BiK) including tyres, maintenance, MOTs, insurance, road tax etc.

I'm veering into the £120k-£125k income bracket (likely around £115k for the next financial year) so I'm losing some of my personal allowance. Does this mean that the car will actually cost me a bit less? And if so, how do I calculate roughly how much?

El_Torro

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

rajanm

El_Torro said:

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

Yes I pay into my pension. I think it's about £250 a month and then my employer pays in a few hundred too. For the purposes of my tax free allowance do both mine and my employers contributions count as salary sacrifice?

El_Torro

The first thing is to be sure of is how you pay your pension contributions. Since your employer is offering a salary sacrifice electric car scheme it would make sense for them also make pension contributions through salary sacrifice. This isn't a certainty though. 

With salary sacrifice pension contributions you don't make any contributions yourself, instead you accept a lower wage in return for higher contributions from your employer. So if you're contributing £250 a month that means you are accepting a wage which is £3k lower. So your salary for next year will be in the region of £112k, not £115k. Even if you join the salary sacrifice car scheme you will still be earning more than £100k. 

As mentioned it's worth contributing more to your pension so that you earn less than £100k. Just depends on whether you can afford to increase your contributions. 

TheSpectator

rajanm said:

El_Torro said:

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

Yes I pay into my pension. I think it's about £250 a month and then my employer pays in a few hundred too. For the purposes of my tax free allowance do both mine and my employers contributions count as salary sacrifice?

If your pension payments are salary sacrifice then they are all treated as employer contributions.

I know it's veering off topic but £250 a month on your salary is a paltry amount to be paying into your pension.

Dazed_and_C0nfused

TheSpectator said:

rajanm said:

El_Torro said:

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

Yes I pay into my pension. I think it's about £250 a month and then my employer pays in a few hundred too. For the purposes of my tax free allowance do both mine and my employers contributions count as salary sacrifice?

If your pension payments are salary sacrifice then they are all treated as employer contributions.

I know it's veering off topic but £250 a month on your salary is a paltry amount to be paying into your pension.

+1 to that.  From what you have posted extra pension contributions are likely to extremely tax efficient.  And will give you a better standard of living come retirement time 😉

rajanm

Dazed_and_C0nfused said:

TheSpectator said:

rajanm said:

El_Torro said:

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

Yes I pay into my pension. I think it's about £250 a month and then my employer pays in a few hundred too. For the purposes of my tax free allowance do both mine and my employers contributions count as salary sacrifice?

If your pension payments are salary sacrifice then they are all treated as employer contributions.

I know it's veering off topic but £250 a month on your salary is a paltry amount to be paying into your pension.

+1 to that.  From what you have posted extra pension contributions are likely to extremely tax efficient.  And will give you a better standard of living come retirement time 😉

I put in about £300 and my employer puts in around £600 from memory. That's the maximum I can put in without paying a lump sum. Does all £900 a month count as salary sacrifice or is it just the £300?

DrEskimo

rajanm said:

Dazed_and_C0nfused said:

TheSpectator said:

rajanm said:

El_Torro said:

As I understand it if you earn £115k a year then you are effectively paying 60% tax on £15k of that. If you are paying £553 a month (or £6,636 a year) for a salary sacrificed company car then you are actually earning £108,364 a year. That £553 a month is only costing you £221.20 a month in reduced take home pay.

As well as the car scheme I assume you can (or already do) pay into a pension via salary sacrifice. It's worth keeping your annual pay below £100k, via salary sacrificing for your car and into your pension.

Yes I pay into my pension. I think it's about £250 a month and then my employer pays in a few hundred too. For the purposes of my tax free allowance do both mine and my employers contributions count as salary sacrifice?

If your pension payments are salary sacrifice then they are all treated as employer contributions.

I know it's veering off topic but £250 a month on your salary is a paltry amount to be paying into your pension.

+1 to that.  From what you have posted extra pension contributions are likely to extremely tax efficient.  And will give you a better standard of living come retirement time 😉

I put in about £300 and my employer puts in around £600 from memory. That's the maximum I can put in without paying a lump sum. Does all £900 a month count as salary sacrifice or is it just the £300?

If the pension is via salary sacrifice you can opt to pay in as much as you like. I currently put in 25% despite my company only contributing 5%.

The employer contribution is not counted as part of the salary you are sacrificing. It is not coming from your salary.

DrEskimo

Back on the topic of EV salary sacrifice and away from pensions - I would check what is available more generally as these salary sacrifice deals can be pretty bad even after the tax benefits.

Also check the excess mileage charges and what happens should you want to leave the company before the end of the lease term.

For all the above reasons I decided to just buy a used EV outright and didn't bother with the salary sacrifice offers.

Bigphil1474

My employer offers a car salary sacrifice scheme, and when I looked at it, it didn't quite work out for me. However, when working out the cost, you also need to take off the costs you wouldn't the be paying. 

tyres - £100 a year?
maintenance - £200 a year?
MOTs - £0 new car for 3 years
insurance - £400 a year
road tax - £190 a year
£890 = £74 a month. 

Very Rough calcs obviously, but that's potentially another £74 a month off your net so around £300. If the net is closer to £220 as described by El Torro, then your real cost is closer to £150 a month. The all inclusive salary sacrifice schemes tend to be a lot cheaper than buying a like for like vehicle outright IME.

The only reason I didn't go for it is because I would have lost my monthly lump sum allowance and 75% of my mileage rate as I 'was benefitting from a company salary sacrifice scheme' even though I was paying for it. That basically wiped out most of the saving made from the sacrifice element. Go figure.

sheramber

Unless you charge it at work you will have a taxable benefit in kind charge.